Energy Stock Trader: Thursday Outlook

by: Steve Zachritz

Oil recovered slightly yesterday after further unrest in Nigeria. You knew it was too good to be true. New leader = everybody's happy? -- No way!

Gasoline continued to fall. CNBC of course blamed profit taking and contract expiry. It couldn't be all those tankers queued up in the GoM full of gasoline could it?

Oil Inventory Report Preview (from the Reuters survey)

  • Crude: up 700,000 barrels.
  • Gasoline: up 1.3 million barrels. If imports recover, this number could be very light. Pre-holiday demand, which would be in this number, is unlikely to result in the large withdrawals that are pulling this consensus down.

Natural gas was on a rampage yesterday stopping just short of $8. Hey CNBC: you need to get a new tape of wind tearing off roofs. I've got the shingle count down on all of your current reels. The only thing I saw yesterday that explained the $0.22 rally in natural gas was a low pressure system that formed just west of Cuba. All forecasters at present agree that the storm will only amount to much needed rainfall in Florida over the weekend as it slowly heads east. Development to even a tropical depression is not expected.

Here's a cool shot of it from the Mexican version of NOAA:

Cuba Storm 31 05 2007

Natural Gas Preview

My expectation: 110-115 Bcf BUILD. Consensus: unknown. It's getting harder and harder to find, but I did see a report of 107 Bcf expected out of Strategic Energy and Economic Research Inc. and they're none-too-shabby with the numbers. The over/under for natural gas is likely to be 105 Bcf.

Gross gas imports: up another 0.6 Bcfgpd last week. That's on top of a 0.7 Bcfgpd increase in the prior week. As you can see from the following charts, LNG remains robust (at record levels), while Canadian volumes continue to rebound. Long term, Canadian volumes should fall (reduced drilling which is already yielding lower Canadian gross production and increasing demand for Alberta's burgeoning oil sands projects):

LNG Long term 31 05 2007

Analyst Watch: BoA cuts ratings on Andersons Inc. (NASDAQ:ANDE), Pacific Ethanol Inc. (NASDAQ:PEIX) and Verasun Energy Corp. (VSE).